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Monday, January 23, 2017

Bill Mitchell — When mainstream economists jump the shark and lose it completely

There was an Op Ed last week from an Australian academic who attacked Modern Monetary Theory (MMT) along the lines that its proponents are “a bunch of cranks” and practice “charlatanism”. He also considers us to be sellers of “snake oil” and other nasty things. It was an extraordinary public intervention given that the argument was based on assertions drawn from an intermediate mainstream macroeconomics textbook, bereft of historical understanding and bereft of any real knowledge of the way the monetary system and the institutions within it (government, central bank, commercial banks) actually work. The MMT critique went like this: (a) misrepresent MMT through attributing claims to its proponents that are not remotely to be found in the literature; (b) claim you are not misrepresenting the MMT literature by selective quotes that are not actually consistent with the misrepresentations; (c) bring in one liners from textbooks that have been demonstrated to have no real world application and are patently wrong in many key elements of the banking system and the way bond markets operate; (d) call us fools for not knowing any of this. Well, it doesn’t take long into the article to realise who the fool is. The other point is that MMT is now clearly at the stage of development where the mainstream think they have to attack us and put us down. That is the next stage in our development (following years of being totally ignored). Progress is being made....

"First they ignore you. Then they ridicule you. And then they attack you and want to burn you. And then they build monuments to you.…" — Union leader Nicholas Klein in 1914 (a similar quote is often misattributed to Mahatma Gandhi)

Mathematics is just a language – one of many. Sometimes it helps to sort out problems that other languages cannot solve. Usually that is not the case, especially is a social science like economics.

The use of formality is only justified if it simplifies what cannot be easily said in words. Otherwise, it just perpetuates the idea that economics is just a cult of the cognoscenti who have learned a few elementary rules of pure mathematics.

It is used as a faux authority to discourage people who are outside the camp, from challenging the assertions.